European Central Bank Sets Deadline for Cyprus Bailout Deal

The European Central Bank
set Cyprus a Monday deadline to agree a bailout plan,
threatening to cut off funding to the islands' cash-strapped
banks if a programme is not agreed by then with the EU and the
IMF.

The European Central Bank
set Cyprus a Monday deadline to agree a bailout plan,
threatening to cut off funding to the islands' cash-strapped
banks if a program is not agreed by then with the EU and the
IMF.

The decision by the ECB's Governing Council, announced on
Thursday, gives Cyprus a last chance to agree a bailout that
bears the EU/IMF stamp, or else succumb to financial meltdown.

Cyprus has faced the prospect of bankruptcy since Tuesday
when its tiny parliament voted unanimously against a levy on
bank deposits to raise 5.8 billion euros ($7.51 billion)demanded
by the EU under a 10 billion euro rescue.

The ECB's role is crucial because it controls the provision
of central bank funds to Cypriot banks - lifeblood without which
the island's bloated financial sector cannot function properly.

With Cyprus sovereign bonds ineligible for use as collateral
for ECB refinancing operations due to their low credit ratings,
the Cypriot central bank is providing banks with Emergency
Liquidity Assistance (ELA).